I am a research fellow at the Hoover Institution, at Stanford, and the Cullen Professor of Economics at the University of Houston. I am also a research professor at the German Institute for Economic Research Berlin. My specialties are Russia and Comparative Economics, and I am adding China to my portfolio. I have written more than 20 books on economics, Russia and comparative economics. I blog at paulgregorysblog.blogspot.com.

Another Gaffe by the Media: Romney in Israel

Mitt Romney has been skewered by the mainstream media for a statement about Israel and the Palestinian Authority that is accepted as true by top economic historians and anyone with a little common sense. Perhaps Romney should have known better than to make an intellectual point before reporters, whose attention span and education are in short supply, to say the least.

Romney began his to-be-skewered remarks in Jerusalem with a statement of fact:

“And as you come here and you see the GDP per capita, for instance, in Israel, which is about $21,000, and you compare that with the GDP per capita just across the areas managed by the Palestinian Authority, which is more like $10,000 per capita, you notice a dramatic, stark difference in economic vitality.” (He overstated the Palestinian figure, one jubilant critic pointed out, but he spoke without teleprompter and the point remains the same).

Romney’s “gaffe” was to use Harvard economic historian, David Landes’s The Wealth and Poverty of Nations to explain the differences in “economic vitality” between Israel and its Arab neighbors he saw with his own eyes:

“If you could learn anything from the economic history of the world it’s this: culture makes all the difference. Culture makes all the difference.”

The Press buzzed with excitement: Did Romney actually say that Israel is successful and the Palestinian Authority is not because of cultural differences? What an insult! Such a racist and bigot is not fit to be President! What an opportunity to build on the narrative that Romney is gaffe prone!

The mainstream-media hotshots rushed to post their news flashes bereft of the faintest idea of what modern economic historians, such as Landes, mean by “culture.”

“It is culture that provides the key to… the powerful influence of the past on the present and future. The current learning of any generation takes place within the context of the perceptions derived from collective learning. Learning then is an incremental process filtered by the culture of a society which determines the perceived pay-offs.”

So “culture” is not simply how different peoples talk, dress, marry, gather around the dinner table, praise God, or sing folk songs. It is the sum total of collective learning that has been passed down over generations.

North warns that “there is no guarantee that the cumulative past experience of a society will necessarily fit them to solve new problems.” In fortunate cases, such as Israel, its culture has proven suitable to promote economic growth and democracy. In unfortunate cases, such as the Palestinian Authority, “societies that get stuck embody belief systems and institutions that fail to confront and solve new problems of societal complexity.”

But wait, our media wizards protest: Does not Romney understand the media party line that the Palestinian Authority, and perhaps the whole Arab world, is backward because of Israeli occupation and intransigence. The New York Times rushed to set the record straight, quoting a Palestinian spokesman that Palestine would be prosperous were it not for Israel.

“It is a racist statement and this man doesn’t realize that the Palestinian economy cannot reach its potential because there is an Israeli occupation. It seems to me this man lacks information, knowledge, vision and understanding of this region and its people.”

In support of the Palestinian spokesman’s claim, the Times informs its readers that:

“The Palestinians live under deep trade restrictions put in place by the Israeli government: After the militant group Hamas in 2007 took control of Gaza – home to about 1.7 million Palestinians – the Israelis imposed a near-total blockade on people and goods in Gaza.”

Let me get this straight: The Palestinian Authority (and I guess the whole surrounding neighborhood) would be just fine if Israel were only a better neighbor! I must hope that Times readers are smarter than that.

I guess we must add the World Bank (doing business rating), Transparency International (corruption perceptions index), Freedom House (Democracy Index), and the Heritage Foundation (economic freedom index) to Romney’s crowd of insensitive Arab/Muslim/Palestinian bigots. Their institutional quality measures all give Israel a good report card and the Palestinian Authority and its Arab neighbors failing grades. Their scholarly studies show that bad institutions yield low per capita income. Is that not what Romney said?

The most distinguished scholar of Islamic economics (see: Timur Kuran, The Long Divergence: How Islamic Law Held Back the Middle East) describes the weak economic playing cards dealt the Muslim world by Islamic law: Partnerships must be dissolved and shares divided among heirs with the death of any partner; the corporate concept of legal personhood is missing; and banks cannot charge interest. It is these “cultural” factors that contribute to backwardness, not Israeli misbehavior. Fortunately, this discussion takes place in the Ivy Tower. It would rot if it became the subject of political discourse.

For his true comments on Arab backwardness, one news outlet brands Mitt Romney as “remarkably out of touch with reality.” Yes, Romney’s “truth-telling” broke a fundamental commandment of American politics: “Thou shalt not tell the truth.” A presidential candidate who tells the truth must be out of touch with reality. The Romney-in-Israel story demonstrates the lack of knowledge of the media and their brainwashed devotion to cultural relativism combined with an intense desire to pillory Romney. Only our feckless press would describe truth telling as a gaffe.

It is my optimistic belief that American voters welcome someone who tells the truth. We’ll see in November.

Paul Gregory’s new book “Women of the Gulag” will be published shortly by Hoover Press. Please visit here for a preview and information about the companion “Women of the Gulag” documentary.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

forbes…get over it … the media eats at everything politicians say and do…. when you make noise about noise it just increases the level of noise… consider an article covering somethng that mitt stated that was insightful, forward looking, constructive, or uplifting….. within the current state of political antipathy towards increasing the state of mankind that iwould be difficult ….

Part of being a world leader is assume responsiblity for one says, though. Of course, that is only possible if the leader in question actually remembers what he says, too, and doesn’t change his mind every five minutes. But I’m sure Gov. Romney’s supporters don’t mind that.

I think you’re missing the point the trade restrictions that the Israeli governments have placed on Palestine are a major roadblock to developing its economy. Yes, it needs internal reform, too. But even the best internal reforms won’t make economic growth happen until Israel releases its restrictions.

Taking your sources one at a time:

This is the conclusion of the World Bank (http://bit.ly/Ta5uUw):

“Robust private sector growth is necessary for the PA to generate the revenues needed to sustain service delivery. Yet the private sector remains stifled as a result of Israeli restrictions on access to natural resources and markets. Nearly 60 percent of the West Bank remains off limits to Palestinian development while Israeli settlements continue to grow.

Almost all exports from Gaza remain prohibited and imports are still heavily restricted. Without exports and access to the traditional markets in Israel and the West Bank, the Gazan private sector will not be able to recover.”

Freedom House ranks the Gaza Strip and the West Bank low not only because of some of the internal Palestinian Authority restrictions, but also because of Israeli restrictions that block trade and freedom of movement.

The Heritage Foundation doesn’t grade Palestine in its economic freedom index, so I don’t know why you included it as a reference.

And yes, the PA is corrupt. I won’t dispute that.

But here’s the thing: you can’t expect a functioning, free state to emerge under military occupation. So long as Israel restricts freedom of movement, free trade, and expands its settlements, it will be impossible for the Palestinians to develop a stable economy or self-government. Put any group of people under military occupation like the Palestinians experience, and you’d see the same weak economy, the same support for authoritarian parties like Hamas, etc. The Palestinian pattern has been repeated throughout human history.

Alex, you’re entirely correct. Most of us Americans don’t realize the impositions placed on the Palestinian economy by Israel, the USA, and other countries. As such, their economy will never be fully realized until we remove the stigma that all Palestinians are terrorists, and should be carefully contained by whatever means.

I agree with you that the trade restriction by Israel may influence and reduce the GDP. but even if the GDP of the Palestinian will be doubled (from the current 1,400-2,900 USD depends on which source you use), then the cultural difference argument will still be more than valid. you can see this clearly when you look on all the countries bordering Israel.

BTW – if you look at things in a holistic way, you can also argue that the cultural difference is responsible to the promotion and / or support of terror and violence in the Palestinian side and therefore thus the response of Israel was brought upon them due to their cultural difference. The Gaza strip is an excellent example for the priority that the Hamas regime and the populations there give to spending on weapons and terror rather than invest in the economy. BTW – I never understand why so many journalist ignore the simple fact that Gaza strip has a border with Egypt which is NOT CONTROLLED by Israel and still they talk about “complete blocked” etc. Is it because they are not familiar with the geography, or because they afraid to critizise Egypt

Alex: Yes, the Palestinian Authority would be better off economically if there were no hostilities. That is not the question. Although not all the international organizations I mention gather data on the Palestinian Authority, I am confident its institutional ratings would be similar to its neighbors. I assume you are not saying that the PA would be nearly as affluent as Israel if the occupation ended. That depends on its underlying institutions, which is Romney’s point. As I recall, this territory has two competing, corrupt governments, rationing of most goods, no established rule of law, etc. It is hard to imagine such an institutional setting creating anything near affluence.

Paul: I don’t disagree with you. But you can’t expect functioning institutions to emerge under a state of military occupation. That’s simply never happened. Yes, if military occupation ended tomorrow, you’d be left with a corrupt state, but it would at least give the Palestinians the OPPORTUNITY to improve. Right now, it’s impossible. No culture could develop a thriving economy with a strong rule of law given the restrictions placed upon them by the Israelis.

After lifting the occupation, there’s no question that it would take the Palestinians decades to build. But that’s not because of their “culture” or innate aspects. It’s because they’ve been living under a military rule that prohibits them from developing a foundation for strong institutions to emerge.

Imagine if the American Revolution had failed and Massachusetts was placed under military occupation by the British with all the trade restrictions that implies. After 60 years, you’d probably see conditions as dysfunctional there as the Palestinians today. (And you’d also probably see a lot of “Sons of Liberty” committing terrorist acts.) That’s what military occupation does.

Romney may have spoken the truth as he knows it, but he violated any political finesse he might have by doing so. So, now he has the Palestinians against him–and probably didn’t gain much approval from the Israelis. And this guy wants to be President & Commander-In-Chief, our representative to the world’s leaders? He needs to go back to training school first.

Romney may have spoken the truth as he knows it, but he violated any political finesse he might have by doing so. So, now he has the Palestinians against him–and probably didn’t gain much approval from the Israelis. So, this guy wants to be President & Commander-In-Chief, our representative to the world’s leaders? He needs to go back to training school first.

Good article. Regarding limitations for Gaza import and export, Katusha shelling from Gaza might be a good explanation. Although that as well as suicide and terrorist attacks are probably covered by references to Palestinian culture.

From what I gathered, Romney is not very good at foreign relations. He is a smart guy and I am not certain if he did that on purpose. However, from the team that he has recruited it appears that he is heavy on national security. While his words may indicate gaffs, I gather they represent the narrow US-centric view that he and the top 1% of American hold. He is taking a very conservative foreign policy view that may at the end hurt his appeal to the independents. While this election war is fought on economy ground, consolidating on such conservative views of the world will alienate him from the rest and I just cant wait to see John Kerry tear him apart come Democratic convention.

A person’s perception is his reality, therefore it must be that Mitt Romney is out of the media’s reality. But it is good that the media makes such points. I find that most of the time, if the media puts forth a particular point of view on something I know little or nothing about, either directly or indirectly by the use of pejorative or complimentary words, I can safely take the opposite point of view and be right. And the more strongly they take a point of view, the more strongly I can take the opposite point of view. That’s not good policy to take and hold onto, but it’s good for first look.

The truth is that there are few real journalists anywhere. Journalists are really supposed to follow after Sergeant Joe Friday’s maxim: “Just the facts, ma’am, just the facts.” Read or listen to any news, anywhere. At the least word choice is almost always slanted. Interviews supporting the journalist’s viewpoint are chosen to be emphasized and contrary interviews are either avoided or treated in such a way as to denigrate the interviewee. Worse yet, the journalist revers his intelligence and wisdom and therefore his opinion over his readers’ or listeners’ opinions. I could go on, but I’m sure you know the drill.

In such a milieu, how can one determine the facts? The only way I know is to use the media as a starting point and then go do your own research or find someone who has done so. I realize that this is a blog which is clearly opinion rather than news, but I appreciate that your approach to such a subject is so journalistic. Keep it up.

There is a free and independent Palestinian state with a more stable and less corrupt government. It is JORDAN. It still holds true that the culture promoting technology, education, freedom, commerce will achieve more (better standard of living, better scientific achievements and better life) than the culture promoting ignorance, terror, theocracy and corruption